This drop in remittances comes even as New Delhi tries to kick-start its economy in the wake of the lockdown imposed due to the pandemic

Gulf countries constitute roughly 62 per cent of India’s remittances. Officials say that India being a net importer of oil, the fall in global crude oil prices is generally regarded as good news since it reduces the country’s trade deficit. However this time around, it has contributed to weaker growth in the Gulf Cooperation Council countries, affecting the inflow of remittances. The weak economic growth in the United States would also adversely impact employment there and therefore, the remittances to India. The US and Canada account for nearly 20 per cent of remittances to India. As the US is the hardest hit by the pandemic in terms of number of deaths, the Corona virus outbreak has affected Indian expats there. A record number of people have been rendered unemployed in the US. More so in an election year, since President Donald Trump is under pressure to provide jobs to American citizens first.

Big task

The fall in remittances will hit different states differently. “The decline in foreign remittances because of a meltdown in global economy including Middle East is likely to significantly impact southern states like Kerala which receives the highest amount of remittances. This was critical when the state reeled under severe floods in 2018. This could also result in lower bank deposits in such states, and that would bring down household savings,” said Soumyakanti Ghosh, group chief economic advisor at State Bank of India group.

This drop in remittances comes even as New Delhi tries to kick-start its economy in the wake of the lockdown imposed due to the pandemic. These overseas Indians, who are now back, will need to be gainfully employed within the country, which will be a big task as employers all around the world, including in India, are cutting down on jobs at the moment as the market looks glum. Besides, India first needs to find avenues to keep its own domestic workforce employed.

While India will be unable to make up for the fall in remittances in the short-term, what it can do is find ways to employ some of these overseas workers in high-value sectors. This will also provide New Delhi with an opportunity to reverse a part of the brain drain that has taken some of the best minds away from Indian shores in the past.